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The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. ? PRICE (Dollars per hundred cubic feet) 40 36 32 28 24 20 16 12 co 4 0 0 1 2 True MR 3 4 5 7 8 QUANTITY (Hundreds of cubic feet) False ATC MC 9 10 D + Which of the following statements are true about this natural monopoly? Check all that apply. Monopoly Outcome The water company is experiencing economies of scale. The water company is experiencing diseconomies of scale. The water company must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. True or False: Without government regulation, natural monopolies can earn positive profit in the long run.

The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. ? PRICE (Dollars per hundred cubic feet) 40 36 32 28 24 20 16 12 co 4 0 0 1 2 True MR 3 4 5 7 8 QUANTITY (Hundreds of cubic feet) False ATC MC 9 10 D + Which of the following statements are true about this natural monopoly? Check all that apply. Monopoly Outcome The water company is experiencing economies of scale. The water company is experiencing diseconomies of scale. The water company must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. True or False: Without government regulation, natural monopolies can earn positive profit in the long run.

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.9P
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The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per hundred cubic feet) 40 36 20 12 8 4 0 0 1 MR 8 2 3 4 5 6 7 QUANTITY (Hundreds of cubic feet) ATC MC 9 10 O True The water company is experiencing economies of scale. The water company is experiencing diseconomies of scale. The water company must own a scarce resource. O False D Which of the following statements are true about this natural monopoly? Check all that apply. + Monopoly Outcome (?) It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. True or False: Without government regulation, natural monopolies can earn positive profit in the long run.
Transcribed Image Text:The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per hundred cubic feet) 40 36 20 12 8 4 0 0 1 MR 8 2 3 4 5 6 7 QUANTITY (Hundreds of cubic feet) ATC MC 9 10 O True The water company is experiencing economies of scale. The water company is experiencing diseconomies of scale. The water company must own a scarce resource. O False D Which of the following statements are true about this natural monopoly? Check all that apply. + Monopoly Outcome (?) It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. True or False: Without government regulation, natural monopolies can earn positive profit in the long run.
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